RadioShack (RSH) is a leading consumer electronics retailer that is trying to reboot its business. Revenue flattened and net income fell during the first half of the year as RadioShack continued to contend with tough, post-recession competition for customers.
Revenue in the January to June period totaled $1.96 billion, almost unchanged from the same period last year. Comparable-store sales dropped by 4.1 percent year-over-year in the first half. Net income flopped to $60 million in the six months ended June 30, down 41 percent from the same period last year.
RadioShack finally generated significant revenue growth last year following a long lull but net income barely budged. Revenue rebounded to $4.4 billion in 2010 after bouncing around near $4.2 billion from 2007 through 2009. Net income was essentially unchanged at $206 million in 2010, just $1 million more than in 2009 and still $30 million below the peak level in 2007.
RadioShack hopes to electrify its sales and profits by getting rid of the T-Mobile line of handsets and services at company-owned stores in favor of Verizon Wireless, the largest wireless communications carrier in the United States. RadioShack announced July 26 that it will start selling Verizon Wireless products and services in more than 4,300 company-operated RadioShack stores starting Sept. 15.
Though the switch to Verizon may prove profitable, Wall Street sees some static ahead for RadioShack. A large majority of stock analysts who were following the Fort Worth, Texas company in mid-August had neutral hold ratings on its stock.
Credit rating outlook
Investors in debt securities also harbor some reservations about RadioShack's prospects in the highly competitive business of retailing mobile communication handsets, notebook computers, and other consumer electronics.
Fitch Ratings in early August affirmed RadioShack's long-term issuer default rating of BB but changed the rating outlook for the company to negative from stable, citing competitive pressure from such retail rivals as Best Buy (BBY) and Staples (SPLS).
Fitch analysts Kristi Broderick and Philip M. Zahn said in their Aug. 8 report that mobile communications products and services represent a major product platform at RadioShack, but it is "a lower-margin business operating in a competitive space where other larger players in the consumer electronics space (Best Buy and Staples) are ramping up their efforts."
For this reason and others, "RadioShack's longer term earnings growth prospects remain a concern," Broderick and Zahn write.
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